 "With auto sales down, motor insurance may also see dip")
The demand for automobiles remained weak after the October-November festive season, with eight of the country's leading vehicle makers together registering a decline of 8% at 179,821 units sold in November against 195,513 in the corresponding month last year. This is expected to lead to a dip in motor insurance business for general insurers for the month of December.
November-December is generally considered by the general insurance industry as a time of boost of sale of insurance policies, since several vehicle manufacturers offer attractive discounts and deals for purchase of cars and two-wheelers. However, industry sources said that this year, the incentives offered by auto companies does not seem to have paid off.
"Post the festive season, December is the month that we look forward to, to meet our fiscal premium targets, since year-end discounts are at their peak during this time. But this year, we have got a feedback that the discounts have not been able to revive the sales for the companies till now, which would have a direct impact on our premium collections," said the general manager of a public sector general insurer.
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High fuel prices, expensive finance and tighter lending norms, among other reasons, hit demand in the month. Auto sector analysts also said that this situation is expected to continue. The auto analyst of a large brokerage said that apart from tighter lending norms, inflation has lead to a lower disposable income among consumers for purchase of comfort products like cars and two wheelers. "Though several auto companies have been betting big on their December discounts, without realising that consumers are not ready to purchase vehicles. Revival of consumer-demand could only be seen in the next calendar year," the analyst said.
Industry officials, meanwhile, are hopeful of the last week of the year, being able to revive consumer demand for vehicles. Sanjay Datta, head of underwriting and claims at ICICI Lombard General Insurance said that they would need to wait till 2013 ends, to see whether there is any big impact on vehicle sales and its effect on motor insurance business. Third party motor insurance covering the liability arising out of third party motor claims is mandatory in India. Own damage motor policy which covers the vehicle and its owner from suffering damage in any incident/accident, is presently optional.
Motor insurance is the biggest contributor to the total premiums of general insurance companies. It ranges from 40-45 per cent in companies, as proportion of their total business. According to data from Insurance Regulatory and Development Authority (Irda), motor (third party and own damage) contributed Rs 16051.61 crore till eptember to total premiums of Rs 38718.18 crore.